U.K Power Capacity Plan to Cut Trading Profit, BI Says

By Rachel Morison -
Nov 30, 2012

(Corrects attribution in headline.)

A U.K. government plan, outlined in
its Energy Bill published yesterday, to pay power producers for
back-up supplies will reduce price volatility and cut trading
profits, according to Bloomberg Industries.

Electricity traders can generate returns from the
volatility in price differences between peakload power,
delivered from 8 a.m. to 8 p.m. on weekdays, and around-the-
clock baseload, Chris Rogers, a utility analyst at Bloomberg
Industries, said today by e-mail.

The U.K. government is increasingly concerned about the
security of power supplies after the regulator Ofgem warned that
capacity will decline, raising the risk of shortfalls from 2015.

RWE AG (RWE), which has invested more than 4.5 billion pounds
($7.2 billion) in energy infrastructure in Britain since 2006,
said yesterday it doesn’t support the capacity mechanism
proposal.

‘‘RWE does not believe the case has been made for the
introduction of a capacity mechanism at this time, the company
said in a statement on its website. ‘‘The introduction of a
capacity mechanism will add significant unnecessary cost to the
British economy and our customers.’’

A final outline of the market model to be adopted is due in
May 2013, with details in October and the first auction in 2014
for 2018-19 delivery, Rogers said.